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Innocence abroad: foreign account compliance in 2013

Mark Twain's book "The Innocents Abroad" tells of his travels in Europe and the Middle East with other Americans in 1867. It is one of the best-selling travel books in publishing history. As the title implies, Twain's theme was that Americans can often be innocently unaware of the reality and demands of the rest of the world.

If Twain were writing today, he could easily include a chapter on Americans' offshore bank accounts. For taxpayers in Texas and across the country, innocence about their obligations to report foreign bank accounts can be costly.

 

For example, let’s say you’re one of the nearly 40 million Americans who were born abroad. You have a child who was born in the U.S. who was given a large gift by a grandparent who lives overseas. The gift was more than $10,000 and it is deposited in a foreign bank account.

 

It would be easy to be unaware of the possible need, in cases like this, to file an FBAR form. FBAR stands for Report of Foreign Bank and Financial Accounts. It is due on June 30 each year.

 

Similarly, there are reporting requirements for certain inheritances and gifts from foreign sources. The applicable IRS form for this is Form 3520.

 

For example, let’s say you’re one of the nearly 40 million Americans who were born abroad. You have a child who was born in the U.S. who was given a large gift by a grandparent who lives overseas. The gift was more than $10,000 and it is deposited in a foreign bank account.

 

It would be easy to be unaware of the possible need, in cases like this, to file an FBAR form. FBAR stands for Report of Foreign Bank and Financial Accounts. It is due on June 30 each year.

 

Similarly, there are reporting requirements for certain inheritances and gifts from foreign sources. The applicable IRS form for this is Form 3520.

 

There has also been a new layer of reporting requirements added recently by the Foreign Account Tax Compliance Act (FATCA).

 

The penalties for failing to file required forms can be substantial.  The penalty amounts start at $10,000 and go up from there. And of course, if the offshore account activity does not seem innocent, there is a chance that federal authorities could pursue tax evasion charges.

 

 

Source: Importance of reporting overseas assets,” MarketWatch, Eva Rosenberg, 5-13-13

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